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Income Taxes
 12 Months Ended
Sep. 30, 2012
Income Tax Disclosure [Abstract]  
Income Tax Disclosure [Text Block]
G.Income Taxes

 

The provision for income taxes on continuing operations consisted of the following for the years ended September 30:

 

(in thousands) 2012  2011  2010 
Current $2,519  $1,627  $2,576 
Deferred  1,855   3,776   422 
Total income tax expense $4,374  $5,403  $2,998 

 

Income tax expense on continuing operations differs from the “expected” income tax expense computed by applying the U.S. federal statutory rate of 34% to earnings before income taxes for the years ended September 30 as a result of the following:

 

(in thousands) 2012  2011  2010 
Computed expected tax expense $4,194  $5,323  $2,347 
State income taxes, net of federal benefit  140   140   105 
Stock option disqualifying dispositions and other permanent differences  40   (60)  546 
Total income tax expense $4,374  $5,403  $2,998 

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the Company’s deferred tax assets and liabilities at September 30 were as follows:

 

  (in
thousands)		  2012  2011 
Deferred tax assets (liabilities):            
Definite and indefinite lived intangibles   $(14,954) $(14,373)
Property and equipment      (8,627)  (8,660)
Patron tax      3,447   2,241 
Net operating loss carryforward and other    (194)  2,954 
Net deferred tax liabilities        $(20,328) $(17,838)

 

The net deferred taxes are recorded in the balance sheets as follows:

 

    2012  2011 
Current assets    $3,635  $5,195 
Long-term liabilities    (23,963)  (23,033)
Net deferred tax liabilities       $(20,328) $(17,838)

 

Included in the Company’s deferred tax liabilities at September 30, 2012 is approximately $16.1 million representing the tax effect of indefinite lived intangible assets from club acquisitions which are not deductible for tax purposes.  These deferred tax liabilities will remain in the Company’s balance sheet until the related clubs are sold.

 

The Company may recognize the tax benefit from uncertain tax positions only if it is at least more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon settlement with the taxing authorities. We recognize accrued interest related to unrecognized tax benefits as a component of interest expense. We recognize penalties related to unrecognized tax benefits as a component of miscellaneous income (expense) in accordance with regulatory requirements.

 

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. During the years ended September 30, 2012, 2011 and 2010, the Company recognized no interest and penalties for unrecognized tax benefits. The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states.  The last three years remain open to tax examination.

 

For tax purposes, the Company has recognized a loss for tax purposes of approximately $13.5 million for the year ended September 30, 2011 upon the closing of the Las Vegas club. The loss resulted in a loss for tax purposes for the year of approximately $2.3 million. This loss was carried forward to the subsequent year for tax purposes.